TaxTMI 
TaxTMI 
2010 (5) TMI 389
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....lief Undertaking" under section 3(1) of the U.P. Industrial Undertak-ing (Special Provisions for Prevention of Unemployment) Act, 1966. A Notification was issued by the State Government on 24-6-2004, suspend-ing all contracts, agreements and other instruments in force under any law, for a period of one year which resulted in a strike disrupting the operations of the company. Consequently, all manufacturing activities of the Respondent-Company came to a halt, ultimately leading to the declaration of a lockout on 7-3-2006. As a result, on 31-3-2006, the Respondent-Company applied to the Kanpur Electricity Supply Company, hereinafter referred to as "KESCO", for reduction of the contract load from 8 MVA to 1.25 MVA with effect from 1-4-2006. On 19-4-2006, a meeting took place between the officers of KESCO and the Respondent-Company in which a decision was taken for reduction of the load with certain conditions. On the said date itself KESCO conveyed its agreement for reduction of load to the U.P. Electricity Regulatory Commission and sought its formal approval. 3. The Commission did not raise any objection regarding the decision to reduce the load but it observed that the agreeme....
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....against which the Respondent-Company filed Writ Petition No. 20499 of 2009 in which an interim order was passed by the Allahabad High Court on 22-4-2009, directing that in case the Respondent-Company continued to pay the amount as directed by the BIFR, its electricity supply would not be disconnected. The said writ petition is still pending disposal. However, since, in the meantime, the claim of the Respondent-Company for reduction of the load from 8 MVA to 1.25 MVA with effect from 1-4-2006, was not decided or implemented, the Respondent-Company filed Writ Petition No. 20499 of 2009, inter alia, for an appropriate writ or direction to the effect that the load of the Respondent-Company stood reduced from 8 MVA to 1.25 MVA pursuant to the then prevalent provisions of clause 4.41(b) of the 2005 Code, with effect from 1-4-2006, 2.25 MVA with effect from April, 2007 and 2.50 MVA with effect from August, 2007. 5. Interpreting the provisions of clauses 4.41 and 4.49 of the U.P. Electricity Code, 2005, the High Court came to the conclusion that the decision with regard to the reduction of the load of the Respondent-Company stood approved on 19-4-2006, and, accordingly, the effective da....
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....been sanctioned by the licensee." 7. Clause 4.49 was amended with effect from 14-9-2006. Accordingly, both the unamended provisions of clause 4.49 and the amended provisions are set out hereinbelow : Unamended version : "4.49. Release of Connection/Load where arrears disputed are stayed by Court/other Forums : Where there is stay order by any Court, Forum, Tribunal, or by Commission, staying the recovery of any dues by licensee, and during the operating period of any such order : (i )If a consumer sells a premises and an application for release of new connection is made by the purchaser. Or (ii )If any application for enhancement or reduction of load is made by a consumer, the licensee shall release the new connection to such consumer and also permit reduction or enhancement of loads, Subject to : (i )Submission either of Bank Guarantee, or Bonds, or any instruments to the satisfaction of licensee of equivalent amount of pending dues, by the applicant, and, (ii )Agreement with licensee on terms of extension/invoking of guarantee, and, (iii)Levy of surcharge amount on pending dues, And the application of such consumers shall not be kept pending by....
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....dated 17-6-2007, submitted a Bond stating therein that the Company was agreeable to make payment of the arrears, if any, to KESCO upon the directions of the Court and the amount as was decided by the Courts. However, since the two affidavits and the Bond did not secure the outstanding dues of the Petitioners and were also not to its satisfaction, the load was not reduced. As indicated hereinabove, the Respondent-Com-pany, thereafter, filed Civil Misc. Writ Petition No. 24900 of 2009 before the Allahabad High Court. 12. Learned ASG, Mr. Parag Tripathy, appearing for the Petitioners, submitted that since neither the two affidavits nor the Bond filed by the Respondent-Company were acceptable to the Petitioners, the load was not reduced from 8 MVA to 1.25 MVA, as requested, since securing the outstanding balance was one of the pre-conditions for such reduction. The learned ASG urged that since securing the amount payable was involved, neither the affidavits nor the Bond could guarantee recovery of the arrear dues in case of breach. It was further urged that even the unamended version of clause 4.49, on which the Respondent-Company relies, makes it very clear that either release of a....
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....sued a notification granting the Respondent-Company the status of a "Relief Undertaking". The notification, which was initially issued for a period of one year, was subsequently extended for two consecutive periods of one year each on 14-6-2005 and 23-6-2006, respectively. The consequence of the same was that all contracts, agreements, etc. stood suspended for a period of one year, and all proceedings pending before any Court, Tribunal, Authority, etc. stood stayed. 16. On account of the deteriorating market conditions and suspension of most of its manufacturing activities, the Respondent-Company applied for reduction of load from 8 MVA to 1.25 MVA and made a formal application to KESCO to reduce its load in the manner indicated above with effect from 1-4-2006. The said application was in the prescribed proforma under clause 4.41 of the U.P. Supply Code, 2005. 17. In order to prevent a stalemate, the Respondent-Company sought the intervention of the Member-Secretary (Energy), U.P., regarding reduction of the contracted load from 8 MVA to 1.25 MVA on account of the market conditions. According to Mr. Lahoty, this led to a meeting between the Managing Director of KESCO and the ....
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....all the issues raised by KESCO were negated by the Division Bench of the High Court in its impugned judgment. Mr. Lahoty submitted that having regard to the decision of the Rajasthan High Court in Modern Syntax (I) Ltd. v. Debts Recovery Tribunal AIR 2001 Raj. 170 which in its turn is based on the judgment of this Court in Doburg Lager Breweries (P.) Ltd. v. Dhariwal Bottle Trading Co. [1986] 2 SCC 382, wherein it was held by this Court that the object of a Relief Undertaking Act is to sub-serve the public interest and to prevent unemployment in particular, the relevant provisions are to be given a liberal interpretation. 19. Mr. Lahoty also submitted that in clause 4.49 of the Code prior to its amendment, there was an option of furnishing a Bond and filing an instrument in the nature of a Bond, apart from furnishing a Bank Guarantee and no fault could, therefore, be found with the affidavits and the Bond submitted on behalf of the Respondent-Company. It was submitted that since no shortcoming or illegality was mentioned in the decision taken by the Managing Director of KESCO and the Executive Director of LML and since the load reduction application was to be considered as per t....
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.... secured KESCO by an amount of Rs. 64 lakhs approx. which was deposited by the Respondent No. 1 Company as per clause 4.20 of the Supply Code, and the same could be utilized by KESCO in any eventuality. When against the excess security deposit an amount of Rs. 65 lakhs approximately was found to be surplus, the Respondent-Company permitted KESCO to adjust the total amount of Rs. 84 lakhs as late as in October, 2009, which would show the bona fides of the Respondent No. 1 Company. 23. Mr. Lahoty concluded his submissions by submitting that because of the financial hardship under which the Respondent No. 1 Company was functioning, both the State Government as well as the BIFR had shown a great deal of concern and that the Respondent-Company is continuing to pay Rs. 5 lakhs in monthly instalments towards arrears, along with the current dues, and that it was in no position to provide any Bank Guarantee as demanded by the Petitioners. Mr. Lahoty submitted that a public authority should not be allowed to exert pressure when the Respondent-Company was complying with its commitments and the order passed under section 22(3) of SICA by BIFR. Mr. Lahoty submitted that the Special Leave Pet....
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....e arrears in instalments along with the dues, and despite the same being duly followed by one of the parties to the agreement. The threat to yet again disrupt its manufacturing operations looms large on the horizon on account of the inability of the Respondent No. 1-Company to comply with the provisions of Clause 4.41 read with Clause 4.49 of the U.P. Electricity Code, 2005. On 31-3-2006, the outstanding dues of the Respondent-Company was Rs. 8.42 crores and when clause 4.49 was amended, the Respondent-Company was asked to submit a Bank Guarantee/Bond to secure the amount of Rs. 10.24 crores outstanding as arrears on that date. In compliance thereof, the Respondent-Company duly furnished a Bond on 17-6-2007, which was not accepted by the Petitioners on the ground that it did not secure the outstanding dues of the Petitioner No. 1 and were not to its satisfaction. As a result of the above, although, the Petitioners were fully aware of the precarious financial condition of the Respondent-Company and having agreed to reduce the contract load from 8 MVA to 1.25 MVA, it refused to do so on the ground that the Bond provided did not secure the outstanding dues, resulting in a vicious circ....
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....s themselves, but they allowed themselves to be tied up in knots over compliance with the provisions of clauses 4.41 and 4.49 which are Rules framed for application in special cases in order to help industries which had fallen on difficult days, to recoup its losses and to bring its finances on an even keel. 28. There is no dispute that pursuant to an application made on 31-3-2006 by the Respondent No. 1-Company, praying for the reduction of the contract load from 8 MVA to 1.25 MVA with effect from 1-4-2006, a Meeting had been held between the Managing Director of KESCO and the representatives of the Respondent-Company in which a decision was taken for reduction of the load with certain conditions. There is also no dispute that on the said date itself KESCO conveyed its agreement for reduction of load to the U.P. Electricity Regulatory Commission and sought its normal approval and that no objection was raised by the Commission with regard to the said decision except to indicate that the said decision would have to be implemented strictly in accordance with the Electricity Supply Code, 2005. There is also no dispute that when the decision was taken on 19-4-2006 to reduce the cont....